Cincinnati Bell 2007 Annual Report Download - page 153

and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are not permitted
to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of
indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital
stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing the 7%
Notes provides for customary events of default, including a cross-default provision for both nonpayment at final
maturity or acceleration due to a default of any other existing debt instrument that exceeds $20 million.
The Company may redeem the 7% Notes for a redemption price of 103.500%, 102.333%, 101.167%, and
100.000% after February 15, 2010, 2011, 2012 and 2013, respectively. At any time prior to February 15, 2010,
the Company may redeem all or part of the 7% Notes at a redemption price equal to the sum of 1) 100% of the
principal, plus 2) the greater of (a) 1% of the face value of the 7% Notes to be redeemed, or (b) the excess over
the principal amount of the sum of the present values of (i) 103.5% of the face value of the 7% Notes, and
(ii) interest payments due from the date of redemption through February 15, 2010, in each case discounted to the
redemption date on a semi-annual basis at the applicable U.S. Treasury rates plus one-half percent, plus 3)
accrued and unpaid interest, if any, to the date of redemption. The Company incurred interest expense related to
these notes of $17.5 million in 2007 and 2006 and $15.3 million in 2005.
7
1
⁄ 4 % Senior Notes due 2023
In July 1993, the Company issued $50 million of 7
1
⁄ 4 % Senior Notes due 2023. The indenture related to
these 7
1
⁄ 4 % Senior Notes due 2023 does not subject the Company to restrictive financial covenants, but it does
contain a covenant providing that if the Company incurs certain liens on its property or assets, the Company must
secure the outstanding 7
1
⁄ 4 % Senior Notes due 2023 equally and ratably with the indebtedness or obligations
secured by such liens. The 7
1
⁄ 4 % Senior Notes due 2023 are collateralized on a basis consistent with the
Corporate credit facility. Interest on the 7
1
⁄ 4 % Senior Notes due 2023 is payable semi-annually on June 15 and
December 15. The Company may not redeem the 7
1
⁄ 4 % Senior Notes due 2023 prior to maturity. The indenture
governing the 7
1
⁄ 4 % Senior Notes due 2023 provides for customary events of default, including a cross-default
provision for failure to make any payment when due or permitted acceleration due to a default of any other
existing debt instrument that exceeds $20 million. The Company recorded $3.6 million of interest expense
related to these notes in each of 2007, 2006, and 2005.
Cincinnati Bell Telephone Notes
CBT issued $80 million in unsecured notes that are guaranteed on a subordinated basis by Cincinnati Bell
Inc. but not the subsidiaries of Cincinnati Bell Inc. These notes have original maturities of up to 30 years with a
final maturity date occurring in 2023. Interest rates on this indebtedness range from 7.18% to 7.27%. CBT also
issued $150 million in aggregate principal amount of 6.30% unsecured senior notes due 2028, which is
guaranteed on a subordinated basis by the Company. All of these notes may be redeemed at any time, subject to
proper notice and redemption price.
The indenture governing these notes provides for customary events of default, including a cross-default
provision for failure to make any payment when due or permitted acceleration due to a default of any other
existing debt instrument of Cincinnati Bell Inc. or Cincinnati Bell Telephone that exceeds $20 million. The
Company incurred interest expense related to these notes of $15.2 million in 2007 and 2006 and $16.5 million in
2005.
Capital Lease Obligations
The Company leases facilities and equipment used in its operations, some of which are required to be capitalized
in accordance with SFAS No. 13, “Accounting for Leases.” SFAS No. 13 requires the capitalization of leases meeting
certain criteria, with the related asset being recorded in property, plant and equipment and an offsetting amount
recorded as a liability discounted to the present value. The Company had $29.4 million in total indebtedness relating to
capitalized leases as of December 31, 2007 of which, $25.8 million was considered long-term. The underlying leased
assets generally secure the capital lease obligations. For 2007, 2006 and 2005, the Company recorded $2.0 million, $1.3
million and $1.3 million, respectively, of interest expense related to capital lease obligations.
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Form 10-K